Trump’s newly announced reciprocal tariffs have injected a strong level of uncertainty into global markets, underscoring how quickly sentiment can turn when policy surprises challenge investors’ assumptions.
We saw a brief rally as investors tried to price in potential benefits of domestic protection, but once the breadth of these tariffs was spelled out, both US equities and Bitcoin fell sharply.
The immediate aftermath has demonstrated once again that digital assets can trade in close correlation with traditional risk markets when volatility spikes. Despite talk that Bitcoin could act as a hedge against dollar-centric volatility, in practice we’re still seeing a strong correlation between digital assets and broader risk markets in moments of uncertainty.
As demonstrated now with the tariffs announcement, digital assets can exhibit conditional correlations with equities and other risk assets. This is in direct contract it seems to gold and silver which have been largely tracking upwards in March.
Crypto still looks like a risk asset
While the narrative around Bitcoin as a hedge against traditional assets market volatility continues to gain traction in many corners, the swift downward move in Bitcoin alongside equities illustrates that crypto still trades like any other risk asset in the face of sudden uncertainty for most market participants. This does not negate the long-term argument for digital assets as an alternative store of value, but instead emphasizes just how early that narrative still is.
Javier Rodriguez-Alacon, CCO at cryptocurrency asset manager XBTO, said:
“As adoption increases and the market matures, we anticipate that Bitcoin will ultimately evolve toward greater decorrelation from equities, but today’s sharp moves are a reminder that crypto is still vulnerable to the same sentiment-driven forces that shape traditional finance.”
Broad pressure continues
The total crypto market slid nearly 4.9% this week, extending a multi-week downtrend. This mirrors a notable retrenchment in risk appetite across global finance, with many equity indices in Europe and Asia down sharply after the US tariffs were announced.
Sentiment is fragile, as investors await further clarity on whether major trading partners – especially China – will retaliate or attempt to offset tariffs via currency devaluation or other economic levers. That next move could drive another round of volatility in both crypto and equities.
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Risk appetite fades further
High-beta assets across both traditional and digital markets continue to bear the brunt of investor caution as they fell 1.14%. Even a handful of previously resilient altcoins have posted outsized losses, demonstrating that selective capital rotation where only the most liquid and established assets draw interest remains the prevailing trend.
In parallel, stablecoins have seen moderate upticks in usage, indicating that some investors prefer to park capital short term in stable-value instruments until they see clearer direction on macro uncertainty.
“Defensive positioning will continue to increase as the market participants digest the impact of Wednesday’s announcement,” said Rodriguez-Alacon. “Both retail and institutional participants will appear wary of making aggressive bets, given the reemergence of global trade tensions and questions about how monetary policy might evolve if inflationary pressures from tariffs intensify. As we experienced before the announcement, there is selective buying interest at lower price levels for major digital assets like Bitcoin and Ether, but the overall tone is dominated by defensive posturing.”
Outlook for cryptocurrency in Q2
XBTO says it anticipates continued volatility, however, Bitcoin continues to trade in a tight range of 80/90; the fund manager thinks the point to watch is breaking this range, i.e. over 90k, as it can be a catalyst for a major move.
Unless a new catalyst shifts the macro backdrop, near-term performance will hinge on global risk sentiment. In this environment, discipline, risk and liquidity management become paramount.
With attention turning to how these reciprocal tariffs will be enforced in the coming weeks, XBTO says investors should closely monitor key macroeconomic indicators and prudently manage position sizes (particularly by restricting leverage) to prioritize capital preservation until volatility subsides and the impact of the new tariff framework becomes clearer.
